The Foreign Exchange Regulation Act of 1973 (FERA) was
repealed on 1st June, 2000. It was replaced by the
Foreign Exchange Management Act (FEMA), which
was passed in the winter session of Parliament in 1999.
Enacted in 1973, in the backdrop of acute shortage of
Foreign Exchange in the country, FERA had a controversial
27 year stint during which many bosses of the Indian Corporate
world found themselves at the mercy of the Enforcement
Directorate (E.D.). Any offense under FERA was a criminal
offense liable to imprisonment, whereas FEMA seeks to
make offenses relating to foreign exchange civil offenses.

FEMA, which has replaced FERA, had become the need of
the hour since FERA had become incompatible with the pro-liberalisation
policies of the Government of India. FEMA has brought
a new management regime of Foreign Exchange consistent
with the emerging frame work of the World Trade Organisation
(WTO). It is another matter that enactment of FEMA also
brought with it Prevention of Money Laundering Act, 2002
which came into effect recently from 1st July, 2005 and
the heat of which is yet to be felt as “Enforcement
Directorate” would be invesitigating the cases under
PMLA too.
Unlike other laws where everything is permitted unless
specifically prohibited, under FERA nothing was permitted
unless specifically permitted. Hence the tenor and tone
of the Act was very drastic. It provided for imprisonment
of even a very minor offence. Under FERA, a person was
presumed guilty unless he proved himself innocent whereas
under other laws, a person is presumed innocent unless
he is proven guilty.